STRATEGIC PERFORMANCE MANAGEMENT IN PRACTICE: ADVANTAGES, DISADVANTAGES AND REASONS FOR USE

Karima Kourtit & Andr A. de Waal*

Vrije Universiteit Amsterdam & Maastricht School of Management, The Netherlands.

* corresponding author: Endepolsdomein 150, 6229EP Maastricht, The Netherlands Phone: +31-6-51232322 E-mail: andredewaal@planet.nl

Abstract Strategic performance management (SPM) has become an important vehicle for business management in todays turbulent business environment. Therefore SPM has attracted much research interest from the side of both scientists and policy-makers. The question is however whether SPM has brought added value for organizations. This paper examines the advantages, disadvantages and reasons for use of SPM which organizations experienced in practice. Based on literature research and interviews at seventeen prominent Dutch organizations, four main advantages, (higher result orientation, better strategic clarity, higher people quality, higher organizational quality), two main disadvantages (badly aligned system, low information quality) and two main reasons for use (focus on control, focus on strategy) were identified. The research showed that in general the advantages were experienced to a much greater degree than the disadvantages, and that specific reasons for use achieved specific advantages. With the research results, management can convince organizational members that SPM is indeed beneficial for the organization. Management can also check whether full benefit has been achieved by using SPM.

Keywords: strategic performance management, organizational results, management control, performance-orientation

-1Electronic copy available at: http://ssrn.com/abstract=1192264

Introduction Strategic performance management (SPM) has in recent years attracted much research interest from the side of both the academic and business communities. This interest has risen in response to a number of pressing business problems (e.g. increasing number of competitors, changes in the regulatory environment, impact of technology, growing globalization, shifts in customer behavior and expectations, overall desire to improve efficiency and productivity) that created a changing and challenging business environment. This prompted organizations to call for processes that give insight into their activities and performance (Hoopes and Hale, 1999) and help them to manage actions to deal with the changes (Martinez, 1997; Wall, 1999; Brooks and Weatherston, 2000). In this respect, SPM is such a process. SPM is defined as the process where steering of the organization takes place through the systematic definition of mission, strategy and objectives of the organization, making these measurable through critical success factors and key performance indicators, in order to be able to take corrective actions to keep the organization on track (Waal, 2007). The effectiveness of the process is defined as the achievement of financial as well as non-financial targets, the development of skills and competencies, and the improvement of customer care and process quality (Waal, 2007). SPM is used in numerous ways (Kaplan and Norton, 1996a; Chow et al., 1998; Zairi and Jarrar, 2000; Niven, 2002; Andersen et al., 2006): to perform health checks throughout the organization; to clarify and translate vision into operational strategy; to communicate and link strategic objectives and business measures; to enhance strategic feedback and learning; to use performance levels to conduct detailed operational planning of activities and processes; to establish an early warning system through monitoring of key indicators; and to influence and alter employee behavior to promote desired changes. There is evidence that SPM is now implemented in approximately 70 percent of medium-to-large firms in the US and Europe, as well as in many governmental departments (Silk 1998; Marr and Neely 2001; Rigby 2001; Williams, 2001; Speckbacher et al., 2003; Neely et al., 2004; Marr et al., 2004).

The question however is: has SPM been successful in practice? Various authors (Hronec, 1993; Lynch and Cross, 1995; Lingle and Schiemann, 1996, 1999; Kaplan and Norton, 1996b; Rheem 1996; Atkinson et al., 1997; Armstrong and Baron, 1998; Waal, 2001; Lawson et al., 2003) content that companies who have implemented SPM perform better than companies that do not use SPM. But many of these studies are anecdotal and of a case study nature, and are not grounded in rigorous research (Neely et al., 2004). Until now, much work has been

-2Electronic copy available at: http://ssrn.com/abstract=1192264

carried out on the design and deployment of SPM, but relatively little attention has been paid to the impact of SPM on organizational results (Bourne et al., 2000; Neely and Bourne, 2000; Neely and Austin, 2000; Bourne et al., 2003; Neely et al., 2004). Looking at the growing interest, it is essential to know whether the implementation of SPM in organizations will indeed yield the benefits as predicted by the literature, or maybe even produce disadvantages (Dumond, 1994; Groves and Valsamakis, 1998; Haas and Kleingeld, 1999; Lovell et al., 2002; Hoque and James, 2000; Kald and Nilsson, 2000; Norreklit, 2000; Malina and Selto 2001; Shulver and Antarkar 2001; Sim and Koh 2001; Hoque, 2003; Braam and Nijssen, 2004; Davis and Albright, 2004; Papalexandris et al., 2004; Robinson, 2004; Scheipers et al., 2004; Lawson et al., 2005; Tapinos et al., 2005). In addition, Robinson (2004) mentions that little is actually known about the specific reasons why organizations implement SPM. As such this should also be investigated, because each reason for implementing SPM can bring along particular advantages or disadvantages. This paper describes empirical research that was undertaken to provide answers to the following research questions: What are the advantages, disadvantages and reasons behind the implementation of SPM in business practice? What are the relations between the reasons behind the implementation of SPM, advantages and disadvantages?

This paper is organized as follows. The advantages, disadvantages and reasons for SPM use, as found in the literature, are described in the next section. The literature findings are then tested at 17 Dutch organizations and the results are discussed in the third section of the paper. Additional testing by using factor and multiple regression analyses is described and the results are discussed in the fourth section. Finally, the last section provides a summary and limitations of the research. The research described in this paper should help management to better manage expectations of a SPM implementation as the organization is better prepared for the advantages and disadvantages to expect when SPM is implemented for a specific reason. The research results also help management to evaluate the SPM system and to judge whether the organization obtains the most value from it.

SPM advantages, disadvantages and reasons for use The main source to identify SPM advantages, disadvantages and reasons for use was academic and management literature describing the experience of organizations with SPM in practice. A search of academic management databases, on the topic of SPM advantages, disadvantages and reasons for use, initially yielded 5625 matches. After narrowing the

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search criteria to exclusively empirical research into the topics, 28 sources remained. In order to heighten the chance on generalization, it was decided to incorporate only advantages, disadvantages and reasons for use which were mentioned in at least two sources.1 All in all, 4 quantitative and 22 qualitative advantages, 8 qualitative disadvantages, and 41 reasons for SPM use were identified. Table 1 summarizes the SPM advantages, disadvantages, and reasons for use (in decreasing order of sources) and lists the literature sources in which these were found.

Quantative advantage Increase in revenue

Increase in profit

Reduction in costs Higher ROA Qualitative advantage Improvement in communication in the organization on the strategy Closer collaboration and better knowledge sharing and information exchange between organisational units Strengthened focus on what is important for the organization More focus on the achievement of results Higher quality of performance information

Better strategic alignment of organisational units Higher operational efficiency Improvement of management quality Better understanding of organizational members of the strategy Improvement in the decision-making process Higher commitment of organizational members to the organization More clarity of people about their contribution towards achievement of the
1

Literature source Malina and Selto, 2001; Sim and Koh, 2001; Davis and Albright, 2002; Waal, 2002; Said et al., 2003; Braam and Nijssen, 2004; Davis and Albright, 2004; Neely et al., 2004; Robinson, 2004. Epstein et al., 2000; Davis and Albright, 2002; Waal, 2002; Said et al., 2003; Said et al., 2003; Braam and Nijssen, 2004; Davis and Albright, 2004; Neely et al, 2004; Robinson, 2004. Sim and Koh, 2001; Neely et al., 2004. Sim and Koh, 2001; Neely et al., 2004. Literature source Lovell et al., 2002; Baraldi and Monolo, 2004; Heras, 2004; Neely et al., 2004; Papalexandris et al., 2004; Robinson, 2004; Lawson et al., 2004. Mooraj, et al., 1999; Kald and Nilsson, 2000; Neely et al., 2004; Lawrie et al., 2004; Papalexandris et al., 2004; Robinson, 2004. Mooraj et al., 1999; Kald and Nilsson, 2000; Baraldi and Monolo, 2004; Neely et al., 2004; Self, 2004; Dumond, 1994; Bititci et al., 2004; Lawrie et al., 2004; Neely et al., 2004; Self, 2004. Lawson et al., 2004; Neely et al., 2004; Robinson, 2004; IOMA. Business Intelligence at Work, 2005; Tapinos et al., 2005. Malina and Selto, 2001; Shulver and Antarkar, 2001; Lovell et al., 2002; Neely et al., 2004; Lawson et al., 2005. Waal, 2002; Neely et al., 2004; Robinson, 2004. Malina and Selto, 2001; Waal, 2002; Neely et al., 2004. Lovell et al., 2002; Heras, 2004; Neely et al., 2004. Dumond, 1994; Mooraj et al., 1999; Kald and Nilsson, 2000. Malina and Selto, 2001; Neely et al., 2004; Bititci et al., 2004. Lawson et al., 2004; Neely et al., 2004; Papalexandris et al., 2004.

For the reasons for using SPM no selection was made because only four empirical literature sources were found that listed these reasons. -4-

strategy and organizational goals Higher innovativeness Better achievement of organisational goals More pro-activity of organizational members More clarity for organizational members about their roles and goals to be achieved Higher quality of products and services More effective management control Higher employee satisfaction Stronger process orientation Strengthened reputation of the organisation as a quality firm Better strategic planning process Qualitative disadvantage It causes too much internal competition There is too much financial information It is too expensive and too bureaucratic There are too many performance indicators The performance information is too aggregated There is not enough strategic information in the system The performance indicators are too subjective and therefore unreliable There is too much historical information

Sim and Koh, 2001; Waal, 2002; Self, 2004. Waal, 2002; Hatch, 2005; Tapinos et al., 2005. Neely et al., 2004; Hatch, 2005; Tapinos et al., 2005. Lawson et al., 2004; Neely et al., 2004. Waal, 2002; Brown, 2004. Malina and Selto, 2001; Neely et al., 2004. Sim and Koh, 2001; Papalexandris et al., 2004. Shulver and Antarkar, 2001; Neely et al., 2004. Waal, 2002; Self, 2004. Lovell et al., 2002; Tapinos et al., 2005. Literature source Kald and Nilsson, 2000; Papalexandris et al., 2004 Kald and Nilsson, 2000; IOMA, Business Intelligence at Work, 2005 Braam and Nijssen, 2004; IOMA, Business Intelligence at Work, 2005 Dumond, 1994; Kald and Nilsson, 2000; Self, 2004; IOMA, Business Intelligence at Work, 2005 Kald and Nilsson. 2000; Neely et al., 2004 Kald and Nilsson, 2000; Sim and Koh, 2001 Kald and Nilsson, 2000; Malina and Selto, 2001 Kald and Nilsson, 2000; IOMA, Business Intelligence at Work, 2005 Literature source Robinson, 2004. Robinson, 2004. Robinson, 2004. Robinson, 2004. Robinson, 2004. Robinson, 2004. Robinson (2004). Robinson, 2004. Robinson, 2004. Neely et al., 2004. Tapinos et al., 2005. Neely et al., 2004. Lawson et al., 2004 Lawson et al., 2004 Lawson et al., 2004 Lawson et al., 2004. Lawson et al., 2004. Lawson et al., 2004. Lawson et al., 2004. Lawson et al., 2004. Lawson et al., 2004. Lawson et al., 2004.

Reason for use More accurate measurement of performance More focus on the strategy Stronger accountability Need for a broader set of measures of performance Better facilitation of cross-functional understanding Better goal setting Formalization of the strategic planning process Stronger individual accountability of employees Stronger commitment of top management Higher commitment to the strategy Handling the increase in complexity of the organization Better description of mission, strategy and goals Improve the performance of the organization Obtain a better understandings in knowledge and skills of people Better control and with that a better 'obedience' of people Tracking progress towards achievement of organizational goals Aligning employee behaviour with strategic objectives Better communicating of strategy to everyone in the organization Aligning the organization to the strategy Being able to measure people, projects and strategy Being able to measure performance at various organizational levels Translating the strategy into operational terms

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Need to make strategy everyone's job Need to correlate measures and actions better Linking rewards to performance Enforcing and monitoring regulatory compliance Requirement of a business opportunity Expectation of the stock market Requirement of governmental regulations Decision support at top management level Decision support at operational level Providing a better picture of customer and product profitability Making responsibility accounting possible Identity possible needs for changes in strategy Facilitate implementation of business strategy Provide information for external reporting Facilitate comparison with other, similar business units Enhance quality of the organization Determination of the bonus of management and/or staff Monitor whether the business is creating value for shareholders Facilitate a process orientation

Lawson et al., 2004. Lawson et al., 2004. Lawson et al., 2004. Lawson et al., 2004. Lawson et al., 2004. Lawson et al., 2004. Lawson et al., 2004. Lawson et al., 2004. Lawson et al., 2004. Lawson et al., 2004. Lawson et al., 2004. Lawson et al., 2004. Lawson et al., 2004. Lawson et al., 2004. Lawson et al., 2004. Lawson et al., 2004. Lawson et al., 2004. Lawson et al., 2004. Lawson et al., 2004.

Table 1: Listing of SPM advantages, disadvantaged and reasons for use, as identified from the literature

Research approach and results To verify which SPM advantages, disadvantages and reasons for use organizations actually experienced in practice, organizational members of prominent Dutch organizations were interviewed. As the literature search did not yield a structured, validated questionnaire to obtain information from organizations on the SPM advantages, disadvantages and reasons for use they experienced in practice, a self-constructed interview question list was used. The advantages, disadvantages and reasons for use identified from the literature were put in the form of statements and presented to the interviewees. To determine the degree in which interviewees experienced advantages, disadvantages and reasons for use, the statements were set-up in such a manner that the interviewees could give a rating on a Lickert 5-point scale, varying from 1= not at all to 5 = very strong (advantages and disadvantages) and 1 = very important to 5 = not important at all (reasons for use; a reversed scale was used to keep interviewees sharp). The interviewees were also asked if they could give examples from practice, to illustrate their rating. The participating organizations were selected on the basis of one criterion, namely whether they had experience in using a SPM for at least one year. The assumption was that after a period of at least one year, the situation surrounding the SPM should have settled down enough for users to give answers in a fairly objective way (Waal, 2002).

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A letter was sent to each organization outlining the research and inviting them to participate. In total 52 people of 17 organizations from a broad selection of industries participated in the research. No selection of industries was made in order to heighten the chance on generalization of the research results. Table 2 gives information on the participating organizations. The interview question list was not send before the interview in order to increase the likelihood of spontaneity in the answers of the interviewees. This is because the research was more about what interviewees really experienced with SPM in practice than about looking for a correct (theoretical) answer. The researchers were very careful not to influence the interviewees responses in any way during the interview, and also mutually double-checked each grading at the end of the interview. The adopted procedure minimized response bias, although the researchers acknowledge experimenter bias was possible.

Organization Abrona De Lage Landen Eneco Heemskerk ING KLM KLM Cargo Philips Research PQ Europe Rabobank Sara-Lee/DE Schiphol Group Stork Tempo-Team Trespa Wessanen A well-known car manufacturer

Industry Care Financial services Energy Food Financial services Transportation Transportation Manufacturing Manufacturing Financial services Food Professional services Manufacturing Professional services Manufacturing Food Manufacturing

Size Medium Large Large Medium Large Large Large Large Medium Large Large Large Large Large Medium Large Large

Type National Multinational National Multinational Multinational Multinational Multinational Multinational Multinational Multinational Multinational Multinational Multinational National Multinational Multinational Multinational

No. of interviews 5 4 3 4 2 2 2 4 3 4 2 1 2 4 4 5 1

Table 2: Overview of the participating organizations

This research used the common factor analysis (CFA) based on the Maximum Likelihoodmethod (n=52; p< 0,05), because the intention was to identify the main advantages, disadvantages and reasons for use, and to avoid a large amount of data. A Varimax rotation was applied, to secure less ambiguous condition between factors and variables (Hair et al. 1998). Communalities reproduced the declared variance in the variable through the number
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of factors in the factor solution. Several variables with a communality lower than 0.3 were removed from the dataset.

Results of the advantages factor analysis The factor analysis of the SPM advantages yielded four factors, as depicted in Table 3.

SPM advantages Increase in profit Higher operational efficiency Improvement in the decision-making process Improvement of management quality Reduction in costs More effective management control Increase in revenue Better achievement of organizational goals Strengthened focus on what is important for the organization More clarity of people about their contribution towards achievement of the strategy and organizational goals More focus on the achievement of results Better understanding of organizational members of the strategy More clarity for organizational members about their roles and goals to be achieved More pro-activity of organizational members Higher commitment of organizational members to the organization Stronger process orientation Better strategic alignment of organizational units Improvement in communication in the organization on the strategy Higher employee satisfaction Strengthened reputation of the organization as a quality firm Higher quality of products and services Better strategic planning process Higher quality of performance information

Factor 1 (HRO) 0,825 0,747 0,705 0,613 0,610 0,453 0,353 0,468 0,477

Factor 2 (BSC) -0,174 0,191

Factor 3 (HPQ)

0,269 0,126 -0,123 0,200 -0,608

Factor 4 (HOQ) -0,295 0,182 -0,127 0,246 0,275

0,281 0,207 0,574 0,390

0,231

-0,127 -0,108 -0,104

0,884 0,659 0,642

0,189 -0,226 0,376

-0,171 0,134

0,560 0,273 0,128

-0,140 0,637 0,613 0,533 0,527

0,181 0,239 0,161

0,324 -0,122 -0,162 0,115 0,363 0,336

0,216

0,713 0,211 0,327 -0,126 0,157 0,208 -0,105 0,667 0,657 0,530 0,492 0,351

Table 3: Common Factor Analysis of the SPM advantages components

Factor 1, higher result orientation (HRO), consists of variables which all have to do with a higher orientation of organizational members on achieving organizational results, by using SPM. The organization experiences an increase in revenue and a decrease in cost, resulting in an increase in profit. The decrease in costs is specifically caused by higher operational efficiency, better management of the organization, and more effective management control.
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The strengthened focus on what is important for the organization, coupled with the improvement in the decision-making, considerably facilitates the achievement of organizational goals. Factor 2, better strategic clarity (BSC), consists of variables depicting advantages which are caused by SPM increasing clarity throughout the organization on the strategic goals to be achieved. SPM increases the understanding of organizational members of the strategy, by translating this strategy in tangible performance indicators on all organizational levels. This creates more insight for organizational members on the goals to be achieved and their role in this. Factor 3, higher people quality (HPQ), consists of variables depicting the increased quality of organizational members. Through SPM, people in the organization become more pro-active, are more committed to the organization, and are more oriented on processes which help achieve organizational results. In addition, SPM aligns everybody in all the organizational units towards achieving the strategy. Factor 4, higher organizational quality (HOQ), consists of variables which have to do with strengthening the organizations quality. SPM improves internal processes as the communication process on the organizations strategy, the performance information supply process, and the strategic planning process. As a result, employees are more satisfied, the quality of the products and services provided by the organization increase, contributing to a strengthened reputation of the firm as a quality organization.

Results of the disadvantages factor analysis The factor analysis of the SPM disadvantages yielded two factors, as depicted in Table 4.
SPM disadvantages It causes too much internal competition There is too much financial information It is too expensive and too bureaucratic There are too many performance indicators The performance information is too aggregated There is not enough strategic information in the system The performance indicators are too subjective and therefore unreliable Factor 1 (BAS) 0,736 0,735 0,700 Factor 2 (LIQ) -0,215 0,143 0,709 0,640 0,623 0,541

0,435

Table 4: Common Factor Analysis of the Disadvantages

Factor 1, badly aligned system (BAS), consists of variables showing that the implemented SPM system does not have the right fit with the organization. It contains too much financial information so it does not give a balanced view of the organizations performance. It is also too voluminous, making it too expensive and bureaucratic. In addition, the system causes the
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wrong behavior in people as peer pressure escalates in internal competition and mutual strive. Factor 2, low information quality (LIQ), consists of variables which depict the bad quality of the performance information generated by SPM system. The system contains too many performance indicators, which are of too high a level and do not give strategic information. In addition, the performance information cannot be trusted as it is unreliable. This basically renders the performance information meaningless.

Results of the reasons for use factor analysis The factor analysis of the SPM reasons for use yielded two factors, as depicted in Table 5.
Reasons for use Higher commitment to the strategy Better control and with that a better obedience of people Being able to measure performance at various organizational levels Handling the increase in complexity of the organization Enhance quality of the organization Stronger accountability Being able to measure performance at various organizational levels Better description of mission, strategy and goals Improve the performance of the organization Aligning employee behaviour with strategic objectives Better communicating of strategy to everyone in the organization Translating the strategy into operational terms Linking rewards to performance More focus on the strategy Obtain a better understanding in knowledge and skills of people Factor 1 (FoC) 0,575 0,181 0,362 0,622 0,517 0,757 0,153 Factor 2 (FoS)

0,197 0,156

0,161

0,522 0,447 0,586 0,656 0,766 0,461 0,673 0,288

0,112

0,195

Table 5: Common Factor Analysis of the reasons for use

Factor 1, focus on control (FoC), consists of reasons for use that have to do with a better control of the organization. SPM is used to deploy accountabilities and responsibilities on all levels in the organization and subsequently measure and control the performance of these levels. In addition, SPM is used to strengthen the commitment to the strategy in an increasingly complex organization. Factor 2, focus on strategy (FoS), consists of reasons for use that have to do with creating a focus on formulating, deploying, communicating, implementing and understanding the strategy throughout the organization. In addition, SPM his used to translate the organizations strategy in operational terms, align the complete organization to the strategy, better understand the capacities of the people who have to
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execute the strategy, and link their subsequent performance to rewards. In the end, all this is used to improve the organizations performance.

Results of the correlation analysis Its is necessary, before the multiple regression analysis can take place, to test relations between the reasons for use, advantages and disadvantages, to check whether the identified factors are not subjected to the principle of multicollinearity, nor have a strong correlation, because strongly correlated factors would explain the same phenomenon. Although there is no clear limit in the literature for the strength of a correlation, an informal rule says it has to be around 0.6. Table 6 gives the correlation matrix.

Factors Achieved organizational results (HRO) Better strategic clarity (BSC) High people quality (HPQ) High organizational quality (HOQ) Badly aligned system (BAS) Low information quality (LIQ) Focus on control (FoC) Focus on strategy (FoS)

Mean Standard ( ) deviation 3,5 3.5 3.3 3,4 1,7 0,7 0,9 0,9 0,8 0,9

HRO 1 .489 .543 .516 -.092

BSC

HPQ

HOQ

BAS

LIQ

FoC

FoS

1 .430 .380 -.197 1 .516 .047 1 -.110 1

2,0 2,4 2,3

0,8 0,7 0,7

-.180 .121 .388

-.330 .371 .124

-.208 .212 .659

-.328 .179 .399

.176 -.123 -.247

1 .242 -.136 1 .150 1

Table 6: Component correlation matrix of factors

Table 6 show significant correlations between the factors that are not stronger than 0.6, except for the one between FoS and HPQ (r = .659). This is understandable because both factors have to do with the effect that SPM has on people: making them more connected to the strategy and motivating them to deliver better performance. From this point of view, it can be derived that FoS and HPQ are well connected but are really different. In general, the results indicate that the factors are mainly autonomous features and that there is no multicollinearity. Thus, the self-constructed questionnaire as a basis for measuring SPM advantages, disadvantages and reasons for use is justified. Table 6 also shows that the scores on the advantages factors do not differ much from each other, is between 3.3 and 3.5. This

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suggests there is no particular advantage that plays a dominant role when using SPM. The disadvantages turn out to be hardly experienced by the interviewees, is 1.7 and 2.0. This

suggests that the use of SPM brings clear advantages which are dominant over the disadvantages. Further, the interviewees indicate that all the reasons for use of SPM are virtually equally important ( is 2.4 and 2.3). This suggests there is no particular reason that plays a dominant role in the decision to implement and use SPM.

Results of the multiple regression analysis Using a multiple regression analysis, a relation model can be created from the SPM advantages, disadvantages and reasons for use factors (Figure 1). This model is constructed to identify the various relations between de factors. In this respect, several hypotheses can be made, such as: (1) specific reasons for using SPM will yield specific advantages (positive relationship) and disadvantages (negative relationship); (2) specific SPM advantages will create specific disadvantages (negative relationship); and (3) specific SPM advantages will cause specific other SPM advantages (positive relationship). Figure 1 depicts the results of the multiple regression analysis.

Figure 1 shows that the reasons for use factors have significant positive relations with three of the advantages factors and no significant relations with the disadvantages factors. As can be seen from Figure 1, the reasons for use do not have a direct relation with the advantage higher result orientation (HRO). This can be explained by considering this advantage as a logical consequence of the other advantages: a better strategic clarity, a higher quality of people and a higher quality of organization will result in a higher orientation on results (and subsequently achieving higher organizational results). The reason for use focus on control (FoC) has significant relations with three of the advantages. This seems logical as better control, emerging in a.o. better measurement of results, stronger accountability of people, higher commitment to the strategy, and more focus on enhancing the quality of the organization, results in better understanding of the strategy and how peoples role fit in with achieving this strategy (BSC), a stronger process orientation and more pro-activity in achieving results (HPQ), and a higher quality of the organization (HOQ). The reason for use focus on strategy (FoS) yields one advantage, higher organizational quality (HOQ). This can be explained by the fact that FoS is aimed at obtaining a better understanding of the knowledge and skills of people, subsequently aligning them better with the strategy (f.i. translating the strategy in operational terms) and then rewarding them on achieving

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strategic goals. This results in higher employee satisfaction and a higher quality of processes, products and services, as stipulated in the strategy.

Reasons for use

Advantages

Disadvantages

Higher Result Orientation

.285

.332

.273 Badly Aligned System

Focus on Control

.261

Better Strategic Clarity

.467 Focus on Strategy

.293

Higher People Quality .330 .342 .294 Higher Organizational Quality .320

Low Information Quality

Figure 1: Relation model

There are no significant relationship between the reasons for use and the disadvantages, nor between the advantages and the disadvantages. From this result it can be inferred that the disadvantages, which did not occur very often anyway (see Table 6), do not automatically stem from specific reasons for use or are inescapably linked to specific advantages. If disadvantages are experienced, they occur stand-alone.

There are several significant relations between the SPM advantages, specifically between higher result orientation (HRO) and better strategic clarity (BSC), higher result orientation (HRO) and higher people quality (HPQ), and higher people quality (HPQ) and higher organizational quality (HOQ). These factors can be interpreted as mutually reinforcing pairs.

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A strong focus on the strategic issues that are important to the organization which is conveyed to all organizational levels (HRO) creates more clarity for organizational members about the strategic issues (BSC), their role in dealing with and working on these issues (BSC), resulting in a strong focus on the achievement of results on all organizational levels (BSC). In turn, this strong focus (BSC) will increase the capability of the organization to achieve its financial results (HRO) and organizational goals (HRO). More effective management control (HRO) translates into stronger process orientation (HPQ) because there is better control of the progress in the processes. This in turn results in higher operational efficiency (HRO). When effective management control is coupled with the strengthened focus on the strategic issues (HRO), organizational units are better able their goals and processes to the strategy (HPQ). Subsequently, organizational members are then more committed to the goals of the organization (HPQ) and are pro-active to achieve these (HPQ). This will also increase capability of the organization to achieve its financial results (HRO) and organizational goals (HRO). Higher commitment (HPQ) translates into higher employee satisfaction (HOQ) and in general in higher quality products, services and processes (HOQ) as organizational members are more motivated to excel. This then yields a strengthened reputation of the organization as a quality firm (HOQ). Better performance information (HOQ) better supports the process orientation (HPQ) and makes it possible for organizational members to become more pro-active (HPQ). Improved communication on the strategy (HOQ) increases the commitment of organizational members to the organization (HPQ) as they better understand what is important. It has to be noted that no linear one-way relations among SPM advantages were to be found. This is in line with Norreklits (2000) notion that the contention of Lynch and Cross (1990) and Kaplan and Norton (1996b) about linear relations is false. As such Norreklits (2000) statement that there is no single, unique sequence of events, and each advantage may contain both drivers and outcome measures that may be related to more than one other advantage has to be taken serious. This means that each advantage, as an independent variable, has a multiple positive effect.

Summary and limitations The research described in this paper focussed on answering the questions: What are the advantages, disadvantages and reasons behind the implementation of SPM in business practice? and What are the relations between the reasons behind the implementation of SPM, advantages and disadvantages? Based on a literature study and practical research at 17 prominent Dutch organizations, it became clear there are two main reasons for implementing SPM and four

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advantages and two disadvantages which are to be expected from using SPM. The reason for use factor focus on strategy has to do with creating a focus on formulating, deploying, communicating, implementing and understanding the strategy throughout the organization and yields the SPM advantage better strategic clarity. The reason for use factor focus on control has to do with better controlling the organization, and yields three advantages: better strategic clarity, higher people quality and higher organizational quality. The two SPM disadvantages, badly aligned system and low information quality turned out to be stand-alone disadvantages which were not frequently encountered by the organizations that participated in the research. The research also showed that the four SPM advantages form several mutually reinforcing pairs which strengthen the benefits to be expected from implementing and using SPM. The practical implication of this research is that implementing and using SPM yields specific benefits for an organization. Management now knows which advantages are to be expected and can use the research results to convince organizational members that SPM is indeed beneficial for the organization and only has minor drawback in the shape of a limited number of disadvantages which do not occur frequently. Management also can now check whether full benefit has been achieved by using SPM. If one or more of the SPM advantages are not noticed, management has to investigate whether SPM is used in the right manner. Overall, this research suggests, like Bryant et al. (2004), that management needs to make the advantages of SPM explicit before the SPM implementation starts and keep stressing these advantages during and after implementation. This will heighten commitment of organizational members for SPM and increase a successful use of SPM. There are several limitations to the research. The sample size of the research was relatively small. Although 17 organizations participated in the research, only 52 people were interviewed so generalization of the results for all organizations cannot be made. Also, the selection of the 17 organizations can have created a bias. It is not unlogical to assume that organizations which have successfully implemented and used SPM are more willing to participate in the research than organizations which did not have these positive experiences. As a result, the SPM advantages might be overstated in the research results while the SPM disadvantages were underexposed. In addition, another research method such as a mail-out surveys could yield different results because the risk of interviewer effects are lower. Another limitation is that this research is not longitudinal. Longitudinal studies would better examine the developments and shifts in the relations between SPM advantages, disadvantages and reasons for use.

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